Securities Issues and Insurance

A. Securities and Insurance Expert Witness.

Expert Witness: Securities and Insurance Matters. I have served as an expert witness in numerous securities and insurance cases throughout the U.S. and have been qualified as an expert witness in trial courts in about 20 states.

Consultant to the U.S. Attorney. By way of example of my various assignments, I have been retained by the U.S. Attorney, the Middle District of Florida, as an expert consultant in a complex civil insurance matter that recently settled.

Consultant to the U.S. Department of Justice: Expert Witness to the U.S. Air Force. I have been retained by the U.S. Department of Justice as an expert consultant in a complex securities and insurance case. In addition, I have served as an expert for the United States Air Force in a complex CGL environmental case.

Expert Witness on Behalf of Liquidators: Securities Issues. I have likewise been retained in insurer liquidation matters which typically include complex securities issues, by: (i) the Liquidation Division of the Florida Department of Financial Services as an expert witness and recently testified on their behalf in a liquidation matter with significant securities components, (ii) the Liquidation Division of the Arizona Department of Insurance and similarly (iii) the Liquidation Division of the Ohio Department of Insurance.

Bachelors Degree: Mathematics. I hold a B.A. in secondary mathematics from the University of Northern Iowa (1969).

Masters Degree: Educational Psychology. I hold an M.Ed. in Educational Psychology from the University of Hawaii (1972).

Juris Doctors Degree. I hold a J.D. degree from the University of Illinois (1974).

C. Legal Background.

Lawyer. I am a member of the Iowa, Illinois (inactive) and Florida Bar, all by examination and have been a securities and insurance lawyer since 1975. I am also licensed to practice law before the U.S. Supreme Court.

D. Reinsurance Arbitrator: Securities Matters.

Securities Matters: Reinsurance Arbitrator: November 2003 to Present. My background includes extensive exposure to the various securities mechanisms and their relationships to reinsurance relationships. I am a certified ARIAS-US reinsurance arbitrator (see immediately below) and have sat as an arbitrator in cases involving complex securities matters in connection with reinsurance arrangements. The relevance of this experience to this case is that as a reinsurance arbitrator, my skills and understanding of the U.S. securities marketplace and its related regulation are often a condition precedent to serving as an effective arbitrator. Examples of securities mechanisms routinely encountered in reinsurance agreements and disputes include: (i) letters of credit trust agreements (ii) the value of securities (if so utilized) transferred from the reinsurer to the insurer and (iii) in liquidation matters, the value of assets set off against obligations under collection by the liquidator.As of November 2003, I was certified by AIDA Reinsurance and Insurance Arbitration Society, United States (“ARIAS-US”) as an arbitrator for reinsurance and insurance matters. Today, there are about 200+ individuals so certified by ARIAS in the United States.ARIAS-US certifies knowledgeable and reputable professionals for service as panel members in reinsurance and insurance arbitration matters. The organization’s criteria for certification are as follows:

10 years of significant specialization in the insurance/reinsurance industry;

CEO of a Major US Insurance Organization, Regulated Throughout the US; President and Chief Executive Office of the National Council on Compensation Insurance (NCCI), 1990 – 1998. NCCI is one of the larger and more pervasive U.S. insurance organizations. During my tenure as CEO, NCCI had (and continues to have) responsibility to accurately price and file pricing for some $12 - $15 billion of workers compensation insurance in 40 states throughout the U.S. NCCI prepared proposed premium filings for regulators to approve by extracting key data from its 600 member insurance companies and then used that data to project necessary premium changes. NCCI accomplished this mission through some 1,000 employees of which approximately 600 were professionals, and had annual revenues of $140 million.State Law. While I was President and CEO of NCCI, it was governed by, among others, the various state Insurance and Securities Codes (and continues to be so governed today), including all applicable administrative regulations. NCCI was subject as well to the applicable jurisdiction of all state and federal courts. As a result, I am very familiar with applicable securities and insurance laws, regulations and related civil proceedings. Thus, in addition to my direct experience administering Iowa securities law as the chief securities official in the state, I had substantial and significant experience on the industry side as a large corporation governed by similar Iowa laws.

General Counsel and Director of Government Relations to the American Academy of Actuaries: Securities Issues (Washington D.C.), 1980 – 1983. I served as General Counsel and Director of Government Relations for the American Academy of Actuaries, including advising on admissions, discipline, federal antitrust and general corporate law. I represented the 10,000 member professional organization before Congress (e.g., Senate Committees on Banking, Commerce, Finance and Labor, and House committees on Education, Labor, Energy, and Ways and Means) and the various federal regulatory agencies.Securities Issues.The Academy is the U.S. professional organization of actuaries and includes qualified actuaries from all disciplines and all forms of financial institutions. Actuaries are often intimately involved in valuing securities held on insurer’s balance sheets and participate in many other ways in the securities components of insurance companies.

Risk Metrics Corporation. I co-founded this Florida based information company in 1998. Risk Metrics (including Datalister, Inc.) gathers and sells public data relating to workers compensation to a wide range of insurance oriented customers, including insurance agents. Within the last few years, I have sold my interest in this corporation.

Attorney in Private Practice: Securities Matters. As an Iowa attorney in private practice, I represented a number of securities interests and became familiar with regulatory and industry standards of practice as to securities issues.Securities Issues. Those interests also included intimate involvement with the life insurance communities as counsel to the Iowa Association of Life Underwriters (life insurance agents). Specific duties as their counsel included in-depth familiarity with securities issues that came to bear on insurance products and agents that sold such products. Examples included variable annuities (which consist of an insurance product wrapped around an underlying security) and the various compliance requirements relating to the securities components of insurance products.

F. Regulatory

Iowa Securities Chief as Commissioner of Insurance, Iowa 1986 – 1990. As Insurance Commissioner appointed by Governor Terry Branstad in July 1986, I was responsible for the regulatory oversight of all insurance companies, agents and brokers authorized to conduct business in the state of Iowa. Further, these duties also included hands on day in and day out responsibility for the Securities Bureau of the Division, which I oversaw, administered and guided. The mission of the Securities Bureau was and continues to be investor protection through the administration and enforcement of the Iowa Uniform Securities Act, Chapter 502 of the Iowa Code, an act prohibiting fraud and requiring the registration of broker dealer agents and the registration of certain securities.The Bureau accomplished these primary goals by: (i) enforcement of antifraud provisions, (ii) securities registration including full disclosure, (iii) licensing of broker-dealer and agents with emphasis on review of disciplinary history to determine whether to deny the license in the first instance or revoke the license once issued; (iv) the administration of related broker dealer examinations and (v) investor education and the publication and distribution of relating information to investors. On a daily basis, I oversaw and administered these functions.

Broker Dealer Licensing. All brokerage firms and individual agents who do business with Iowa residents must be licensed. Agents are required to have passed certain exams. All applicants provide background and disclosure information which includes any history of discipline or white collar violations. The Bureau reviews applications to ensure that those with unacceptable backgrounds are not licensed in the first instance. The Bureau also has the power to suspend or revoke licenses and the power to censure and fine licensees for misconduct. On a daily basis, I oversaw and administered this licensing function.

Registration. The Bureau reviews registration statements for compliance with the full disclosure and substantive investor protection provisions of the Iowa Code (namely cheap stock escrow, excessive underwriter’s compensation, and excessive options and warrants) as a condition precedent to registration approval. On a daily basis, I oversaw and administered this registration function.

Enforcement and Prosecution. The Bureau has substantive enforcement powers, including that of subpoena and the ability to take statements under oath, take evidence and compel productions of books and records. These investigations encompass both the sale of illegitimate products, boiler room sales and brokerage agent misconducts. On a daily basis, I oversaw and administered this enforcement function.

Securities Issues Embedded in Insurance Regulation. In addition, as the chief insurance regulatory official of the state of Iowa, much of my work included regulating the securities which were represented on the balance sheet of every one of the 1,500 insurance companies authorized to do business in the state. Substantive assets of every such insurer included various forms of securities and among others, the duties of the Insurance Division included determining which securities by law could be carried as admitted assets by such insurers and if so, the valuation to be placed on such securities. The position also included authorizing (or refusing to authorize) the exchange of one security for another on the insurer’s balance sheet.

Securities Issues: North American Securities Administrators Association. Organized in 1919, the North American Securities Administrators Association (NASAA) is the oldest international organization devoted to investor protection. NASAA is a voluntary association whose membership consists of the securities administrators of all of the states and those of the provincial and territories of the U.S. Concurrent with my service as the Chief Securities Official of the state of Iowa, I was in ongoing attendance at the NASAA meetings. Issues discussed included the leading securities regulatory matters of the day.

Securities Issues: National Association of Insurance Commissioners (NAIC), 1986 – 1990. Concurrent with my service as Iowa Insurance Commissioner, I served as a member of the NAIC. The NAIC is an organization of the Insurance Commissioners of all 50 states and meets quarterly in locations throughout the U.S. to consider and evaluate national insurance issues. Further, the organization is professionally staffed with more then one hundred personnel. The organization is based in Kansas City, Missouri. The NAIC considers all major insurance issues and then promulgates model insurance laws and regulations, which are then routinely (but optionally) adopted at the individual state level.

NAIC Chairmanships – Chairman of the Midwest Zone. I was elected by my fellow Insurance Commissioners from the Midwest Zone (composed of the Midwest states, constituting about one quarter of all of the states) to provide leadership and representation of the Midwest before the balance of the states. This position included a position on the Executive Committee of the NAIC as well as major responsibilities relating to the assignment of states (and their related examiners) to specific examinations, both triennial and Market Conduct.

NAIC Leadership: Member of the Executive Committee. I also served as an elected member of the Executive Committee of the NAIC, the body that served as the steering committee of the organization, providing leadership between full membership meetings and providing recommendations to the full membership as to complex or politically charged issues within the organization.

NAIC Chairmanships – Securities Issues: Chair of the Life Insurance Committee: As a member of the NAIC, I served as both Vice Chairman and Chairman of the NAIC Life Insurance Committee. The charge of this Committee was oversight over all issues relating to life insurance products (including certain securities issues that arose in connection with securities embedded in life insurance products such as variable annuities) as well as life insurers, including the manner in which they carried securities on their balance sheets.

NAIC Chairmanships: Securities Issues: Chair of the Universal Life Insurance Task Force. In addition to chairing the Life Insurance Committee, I also chaired the Universal Life Insurance Task Force, which likewise included oversight over certain securities issues that arose in connection with the inclusion of securities in variable annuity and certain life products.

NAIC Chairmanships: Securities Issues: Chair of the Life Insurance Product Development Task Force. I also chaired the Life Insurance Product Development Task Force. While chairman of this task force, I led the development of model disclosure statements for universal and indeterminate premium life products designed to assist consumers in their comparison of different types of interest sensitive life insurance products.

Member, Valuation of Securities Committee. In addition, I served as a member of the Valuation of Securities Committee. This committee had oversight responsibility for the manner and methods by which US insurance regulators value the myriad and pervasive number of securities that insurance companies carry on their financial statements.

Other NAIC Chairmanships: I also served in a number of additional NAIC capacities including Chair of the Financial Services and Insurance Regulation Task Force.

NAIC Committee Memberships: Securities Issues, Accounting Practices and Procedures Committee. As a member of this committee, my responsibilities included the manner in which insurers accounted for all of their assets, a high percent of which were securities products.

In addition, my service on the following NAIC Committees was also helpful in this regard:

Member, the Blanks Committee

Member, Guarantee Fund Committee

Member, Rehabilitator and Liquidators Committee

Member, Casualty Actuarial Committee

Member, Commercial Lines Committee

Member, Valuation of Securities Committee

Member, International Insurance Relations Committee

Member, Accounting Practices and Procedures Committee and

Member, State and Federal Legislative Committee.

Ongoing Regulatory Involvement. In the years since leaving the regulatory ranks, I have continued to be closely involved with the NAIC and the regulatory community. As President and CEO of NCCI, I was in regular attendance at meetings of the NAIC and continue to attend these meetings and to be actively engaged with the regulatory process. Included in this attendance were my observations at the NAIC of the regulation of the disability industry.

First Deputy Commissioner of Insurance, Iowa: Securities Issues: 1976 – 1978. As First Deputy Insurance Commissioner appointed by Commissioner Herbert Anderson, my responsibilities included the regulatory oversight of insurance companies, agents and brokers authorized to conduct business in the state of Iowa, as directed by the Commissioner of Insurance. Specifically, these duties also included hands on - day in and day out responsibility (through the Commissioner) for the Securities Bureau of the Division, which I oversaw, administered and guided, as directed by the Commissioner. The mission of the Securities Bureau was and continues to be investor protection through the administration and enforcement of the Iowa Uniform Securities Act, Chapter 502 of the Iowa Code, an act prohibiting fraud and requiring the registration of broker dealer agents and the registration of certain securities.The Bureau accomplished these primary goals by: (i) enforcement of antifraud provisions, (ii) securities registration including full disclosure, (iii) licensing of broker-dealer and agents with emphasis on review of disciplinary history to determine whether to deny or revoke the license; (iv) the administration of related broker dealer examinations; and (v) investor education and the publication and distribution of relating information to investors.

Securities: Broker Dealer Licensing. All brokerage firms and individual agents who do business with Iowa residents must be licensed. Agents are required to have passed certain exams. All applicants provide background and disclosure information which includes any history of discipline or white collar violations. The Bureau reviews applications to ensure that those with bad backgrounds are not licensed in the first instance. The Bureaus also has the power to suspend or revoke licenses, and the power to censure and fine licensees for misconduct. On a daily basis, as First Deputy Insurance Commissioner, I oversaw and administered this licensing function.

Securities: Registration. The Bureau reviews registration statements for compliance with the full disclosure and substantive investor protection provisions of the Iowa Code (namely, cheap stock escrow, excessive underwriter’s compensation, excessive options and warrants) as a condition precedent to registration approval. On a daily basis, as First Deputy Insurance Commissioner, I oversaw and administered this registration function.

Securities: Enforcement and Prosecution. The Bureau has substantive enforcement powers, including that of subpoena and the ability to take statements under oath, take evidence and compel productions of books and records. These investigations encompass both the sale of illegitimate products, boiler room sales and brokerage agent misconducts. On a daily basis, as First Deputy Insurance Commissioner, I oversaw and administered this enforcement function.

Securities Issues Embedded in Insurance Regulation. In addition, as First Deputy Insurance Commissioner, much of my work included regulating the securities which were represented on the balance sheet of every one of the 1,500 insurance companies authorized to do business in the state. Substantive assets of every such insurer included various forms of securities and among others, the duties of the Insurance Division included determining which securities by law could be carried as admitted assets by such insurers and if so, the valuation to be placed on such securities. The position also included authorizing (or refusing) the exchange of one security for another on the insurer’s balance sheet.

Iowa Assistant Attorney General Assigned to the Insurance Department: Securities Issues, 1975-1976; serving as the Department’s General Counsel. As Assistant Attorney General, I had departmental prosecutorial responsibilities for violations of the Securities and Insurance Code under the state’s APA act. The Attorney General responsibility also included issuing Attorney General Opinions as to the construction of securities and insurance laws and regulations.

Legal Counsel to House of Representatives: Securities Issues. As legal counsel to the Iowa House of Representative (1975 session), I provided counsel on all relevant caucus issues and provided the following support:

Researched pending legislation,

Prepared memorandums in support of proposed legislation,

Provided legal advice, and

Participated in bill drafting, including that relating to securities and insurance matters.

Lecturer at the Bar Review School: Securities and Insurance Issues. I authored and delivered the insurance course to students studying for the Iowa Bar Exam (@ 1985- 1991). I was invited to provide the insurance content review material and lecture for the insurance section of the bar review course in Iowa. Included in this lecture was extensive law applicable to the interpretation and construction of laws and regulations applicable to insurance companies, including related securities issues. I authored this material and provided this lecture to students studying to pass the bar for about six years, until accepting the position of CEO of NCCI in Florida.

Chief of Staff to a U.S. Congressman: Securities Issues. I served as Chief of Staff in the U.S. Congress in Washington D.C. for an Iowa Congressman for about a year. Among others, I participated in legislative drafting of securities and insurance legislation.